Durum

For the past several weeks, the durum market has been fairly quiet and stable. Some may see that as less than positive, but considering the impact of the health scare the coronavirus has had on a number of other markets, remaining stable is a good thing.

 

“Looking at the durum market, on a positive note it’s one of the markets that has been a bit isolated from the sell-off we’ve seen due to the coronavirus scare in China,” said Jim Peterson, marketing director with the North Dakota Wheat Commission.

 

“On the down side with durum, sometimes we get momentum or fund speculative buying in corn, soybeans and the overall wheat markets and it doesn’t carry over into durum,” he added. But this is one of those rare occasions where it’s probably a positive because you don’t get the negative sell-off either. With that said, the durum market remains stable or tranquil, so to speak.”

 

Average bids for good quality durum across the region range from $6.15-$6.50 a bushel. Looking at the Minneapolis Durum Index, the price was $6.12 as of Feb. 3. That’s up slightly from mid-January when the price was around $6.

 

“There is no big variable driving the market, just seasonal tightness and a little bit of pull back in producer selling,” Peterson said. “A year ago we were $4.60 a bushel so, obviously, durum continues to do better than a year ago.”

 

There are a few factors that could influence the market over the next couple months, Peterson noted. One is what happens with the weather in Europe and Northern Africa. Right now the anticipation is that more durum got planted in Italy due to some favorable prices last fall. Weather there over the next couple months will influence production prospects. France is maybe down a bit because of some of the wet fall weather they’ve experienced. Some of the early forecasts for Algeria are for a smaller crop than they had this year.

 

“That would be a positive for U.S. durum exports in 2020 if they do have a smaller domestic crop,” he said.

 

Looking at current factors driving the market, one is that U.S. durum exports and shipments continue to be a big positive on the market. As of the third week in January, U.S. durum sales totaled 30 million bushels (MB), which is double what it was a year ago at this time. Peterson noted that 60 percent of our overall sales have been to Italy, with 18 percent going to African countries, and 5 percent to the balance of Europe. The U.S. also still has 13 percent registered as “undesignated.” Much of that, he feels, will likely go to Italy or to Northern Africa.

 

“One thing that we’ll have to watch as we go into the early part of spring is that while Italy has been the big buyer, representing nearly 70 percent of U.S. durum shipments to date, they only represent 44 percent of sales on the books,” he explained. “What that means is that Italy was a big buyer for immediate delivery last fall. They haven’t been as big a player over the winter months – and come the Great Lakes opening this spring, we’re going to need to see a pretty aggressive return to the export market by Italy in order for U.S. durum exports to reach the goal of 40 MB set by USDA.

 

“While 30 million bushels is certainly a very good start, securing 10 million in sales over the spring months can prove challenging so we’ll be dependent on a big buy from Northern Africa or a resumption in strong Italian sales,” he added.

 

A lot of attention is aimed at Canada, the big player on the world durum export market. Canada has had a good first five months of their marketing year – August through December – with shipments up 40 percent from 2018. Turkey is a non-typical buyer on the world market and is Canada’s leading customer with 26 MB, or roughly a third of their exports. Turkey is followed by Italy at 16 MB and Morocco at 13 MB.

 

Of interest, shipments to two of Canada’s typical quality customers – the U.S. and Japan – are down. Shipments to Japan are down 33 percent from a year ago and they’re down 71 percent to the U.S. with just 3 MB shipped here.

 

Part of that is due to the late harvest in Canada, as well as some of their quality issues, Peterson explained.

 

“While their overall grades may have come in better than anticipated, they’re still well below normal, so sourcing high-end durum or buying it from producers in both the U.S. and Canada is probably proving a little bit tighter than exporters had anticipated,” he said.

 

“We’ll see what happens going forward, but if the market is going to need quality it’s going to have to provide some higher prices than are currently being seen for producers,” he continued. “Even though the market is saying $6.50 for good quality durum, the average take home price for a lot of growers is not close to $6.50 because of quality issues with the 2019 harvest.”

 

With spring looming ahead, Peterson sees the durum market coming to a fork in the road.

 

“While the market has been pretty stable, over the next two months the buyers are anticipating a pretty big increase in planted acres in both the U.S. and Canada, which would put pressure on the market,” he said. “At the same time, there’s starting to be more discussion of the pretty aggressive tightening of durum stocks in Canada, the U.S. and European Union.

 

“Obviously, if we have higher acres and a perfect growing season tight carryover becomes less of an issue. But, if we have hiccups in planting or any type of weather scare this summer, that could change things,” he added. “We’re certainly looking at some of the tightest carryover we’ve seen in more than 10 years in some markets.

 

“So, even though the durum market has been a little boring and stable the last few months, this spring will likely bring a little more movement to prices,” he concluded.